Cross-selling
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Cross-selling is defined by the Oxford English Dictionary as "the action or practice of selling among or between established clients, markets, traders, etc." or "that of selling an additional product or service to an existing customer". In practice businesses define cross-selling in many different ways. Elements that might influence the definition might include: the size of the business, the industry sector it operates within and the financial motivations of those required to define the term. The objectives of cross-selling can be either to increase the income derived from the client(s) or to protect the relationship with the client(s). The approach to the process of cross-selling can be varied. Unlike the acquiring of new business, cross-selling involves an element of risk that existing relationships with the client could be disrupted. For this reason it is important to ensure that the additional product or service being sold to the client(s) enhances the value the client(s) get from the organisation.
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[edit] Cross-selling of professional services
Benefits that can accrue to the customer include the efficiency and leverage that result from using a single supplier for multiple products. When buying complex professional services, like consulting needed to make and integrate an acquisition, using one firm reduces the finger pointing that is common when a problem occurs in an area that stradles two or more services; if only one firm is responsible, finger pointing is eliminated. For the vendor the benefits are also substantial. Most obviously, revenues go up. There are also efficiency benefits in servicing one account rather than several. Often most important, vendors that sell more services to a client are harder for a competitor to displace. The more a client buys from a vendor, the higher the switching cost.
Though there are few ethical issues with most cross selling, in some cases they can be huge. Arthur Andersen's dealings with Enron provide a highly visible example. It is commonly felt that the firm's objectivity, being an auditor, has been compromised by selling internal audit services and massive amounts of consulting work to the account.
Though most companies want more cross selling, there can be substantial barriers, including:
- A customer policy requiring the use of multiple vendors.
- Different purchasing points within an account, which reduce the ability to treat the customer like a single account.
- The fear of the incumbent business unit that their colleagues would botch their work at the client, resulting with the loss of the account for all units of the firm.
Broadly speaking, cross selling takes three forms. First, while servicing an account, the product or service provider may hear of an additional need, unrelated to the first, that the client has and offer to meet it. Thus, for example, in conducting an audit, an accountant is likely to learn about a range of needs for tax services, for valuation services and others. To the degree that regulations allow, the accounts may be able to sell services that meet these needs. This kind of cross selling helped the major accounting firms grow to their current massive sizes. Because of the potential for abuse, this kind of selling by auditors has been greatly curtailed under the Sarbanes-Oxley Act.
Selling add-on services is another form of cross selling. This happens when a supplier shows a customer that it can enhance the value of its service by buying another from a different part of the supplier's company. When you buy an appliance, the salesperson will offer to sell you insurance beyond the terms of the warranty. Though common, this kind of cross selling can leave a customer feeling poorly used. The customer might well ask the appliance salesperson why he needs insurance on a brand new refrigerator. Is it really likely to break in just nine months?
The third kind of cross selling can be called selling a solution. In this case, the customer buying air conditioners is sold a package of both the air conditioners and installation services. The customer can be considered buying relief from the heat, contrary to just air conditioners.
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[edit] References
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This article or section includes a list of references or external links, but its sources remain unclear because it lacks in-text citations. You can improve this article by introducing more precise citations. |
Harding, Ford (2002). Cross-Selling Success. Avon,MA: Adams Media, 230. ISBN 1580627056.
Wittmann, Georg (2006). Cross-Selling Financial Services to Small and Medium Enterprises via E-Banking Portals. Göteborg: Proceedings of 14th European Conference on Information Systems, 8.
